Oil Prices In Pakistan

Seems like Petrol/Diesel prices in Pakistan is the only subject Pakistanis [mostly anti-PMLN] are interested in these days. Social-media [Twitter/Facebook] is filled with trends/posts/tweets on this subject.

According to a recent survey; “S&P Global FinLit Survey – a detailed & comprehensive analysis of worldwide financial literacy”, first of its kind by World Bank, Gallup & George Washington University, there are only 26 percent Pakistanis who are financial literate. However, if we have a look on the social-media, we’ll have an impression that everyone is an economist here.

‘Why the prices [of Petrol/Diesel] not dropping in Pakistan when [Crude] dropping internationally’? Is the most asked question these days, especially from PTI supporters.

First; you DON’T put crude oil in your cars/motorbike. The oil [crude] purchased from international market isn’t useable as it is. It has first to go to a refinery to get processed, to be useable for private and industrial purposes. A barrel of crude oil DOESN’T mean 158.9 liters of refined petrol/Diesel.

The processing / refining one barrel of crude oil results in:

A Barrel Of Crude Oil

Lubricants 0.9%

Other refined products 1.5%

Asphalt oil 1.7%

Liquefied refined gas 2.8%

Residual fuel oil 3.3%

Coke 5%

Still gas 5.4%

Jet fuel 12.3%

Diesel 15.3%

Petrol / gasoline 51.4%

From refinery these products get transported to storages/distribution centers and from there to gas stations etcetera.

In Pakistan, Price of Petrol per liter excluding all types of taxes is PKR 51.94 & the Price of Diesel per liter excluding all types of taxes is PKR 41.54. So keeping these few basics in view, all those demands of bla-bla [PKR 15-20-23-25-29] price seems very unreasonable and deliberate attempt to misguide the masses.

Back to the question; Crude oil prices are at xyz-year-low, then why PMLN govt. hasn’t reduced the prices?

Few weeks after PMLN came into power in October 2013 petrol prices in Pakistan reached PKR 113.25/liter & Diesel PKR 116.95/liter.

Today price of Petrol in Pakistan is PKR 76.25/liter & Diesel price PKR 80.79/liter which is PKR 37 & PKR 36.16 respectively, which is cheaper than it was in Oct. of 2013. Interestingly, In comparison to other countries of the world the current prices of petrol in Pakistan is still PKR 26.77 lesser than the world average [PKR 103.02/liter].

Per liter Oil Prices

Should the government reduce the prices any further?

Anyone who has little knowledge about Pakistan economy would say “No”. As per forecasts oil will stay at $27-35/barrel till mid of 2017 [average $30/barrel]. Oil drop is a golden chance for Pakistan government to increase its revenue. [To be reminded that Pakistan is NOT the only country availing this opportunity to raise the revenue. Many countries like India, UK, Australia and almost every country in EU is doing the same].

Pakistan’s daily consumption:

Petrol 20,468,113.97 liters [15,085 MT]

Diesel 23,720,800.00 liters [19,900 MT]

Revenue generated from Fuel tax/excise/duty will provide stability and a cushion, so when oil prices increase in international market, the government can cut excise/tax rate before increasing the prices and burdening its citizens.

Revenue generated from this all will help the government to recover its previous losses [when the oil was >$100], meet its fiscal deficit targets & facilitates in loan repayments. It’s an opportunity for PMLN govt. to avail this chance and improve the financial conditions of Pakistan.

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